Spies Like Us

Wild Bill Donovan would have loved the Internet. The American spymaster who built the Office of Strategic Services in World War II and later laid the roots for the CIA was obsessed with information. Donovan believed in using whatever tools came to hand in the "great game" of espionage. These days the Net, which has already remade such mundane pastimes as buying books and sending mail, is reshaping Donovan's vocation as well.

The latest revolution isn't simply a matter of gentlemen reading other gentlemen's e-mail. That kind of electronic spying has been going on for decades. In the past three or four years, the World Wide Web has given birth to a whole industry of point-and-click spying. The spooks call it "open-source intelligence," and as the Net grows, it is becoming increasingly influential. In 1995 the CIA held a contest to see who could compile the most data about Burundi. The winner, by a large margin, was a tiny Virginia company called Open Source Solutions, whose clear advantage was its mastery of the electronic world.

Among the firms making the biggest splash in this new world is Stratfor, Inc., a private intelligence-analysis firm based in Austin, Texas. Stratfor makes money by selling the results of its sleuthing (covering nations from China to Chile) to corporations like energy-services firm McDermott International. Many of its predictions are available online at .

Stratfor president George Friedman says he sees the online world as a kind of mutually reinforcing tool for both information collection and distribution, a spymaster's dream. Last week his firm was busy vacuuming up data bits from the far corners of the world and predicting a crisis in Ukraine. "As soon as that report runs, we'll suddenly get 500 new Internet sign-ups from Ukraine," says Friedman, a former political science professor. "And we'll hear back from some of them." Open-source spying does have its risks, of course, since it can be difficult to tell good information from bad. That's where Stratfor earns its keep.

In the past month Stratfor has drawn attention to a carefully assembled open-source report that asserted that last month's attack on Iraq wasn't intended just to punish Saddam Hussein for blowing off U.N. weapons inspectors. By sorting through thousands of pieces of publicly available data--from Middle East newspapers to Iraqi-dissident news--Stratfor analysts developed a theory that the attacks were actually designed to mask a failed U.S.-backed coup. In two striking, contrarian intelligence briefs released on the Internet on Jan. 5 and Jan. 6, Stratfor argued that Saddam's lightning restructuring of the Iraqi military, followed by executions of the army's Third Corps commanders, was evidence that the coup had been suppressed. Predictably, U.S. officials said the report was wrong.

Stratfor merits more than just a curt dismissal. The company used the same techniques to accurately forecast the economic crisis in Asia as well as the social and political troubles in Indonesia, the 1998 India-Pakistan nuclear standoff, and the 1998 rapprochement between Iran and the U.S. Stratfor has missed a few calls--most notably predicting that the euro would flop--but its gritty analysis has already won 15,000 subscribers to its free website.

To turn all of this into a business, Friedman relies on a lean staff of 20 in Austin. Several of his staff members have military-intelligence backgrounds. He sees the firm's outsider status as the key to its success. Stratfor's briefs don't sound like the usual Washington back-and-forthing, whereby agencies avoid dramatic declarations on the chance they might be wrong. Stratfor, says Friedman, takes pride in its independent voice. The Web's resources provide such a tremendous advantage that the Stratfor team has already been able to do away with at least one staple of 20th century spycraft. Says Friedman: "We never go to cocktail parties."